Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions from readers.

Q. Our timing has always been the worst. We bought our home at the very peak of the market, and before selling our existing residence. We used a HELOC for the down payment on the home, expecting to sell the existing one quickly and then use the proceeds to pay off the HELOC. The existing residence did not sell for three years (and the price had to be dropped over $275,000 from the expected sales price, leaving nothing to pay down the HELOC when it did finally sell). Also, the HELOC was used to live off of during that time, because of the unexpected turn of events. Now, we have a $180,000 HELOC (with an additional $100,000 still available on it for $280,000 total), and a $240,000 first mortgage on a home that desktop appraises now for $430,000, though should realistically appraise for around $500,000.

What help exists for homeowners in our circumstances? We do have outstanding credit, no late payments on anything. We are

OK at the moment, but the HELOC is ballooning in less than three years and interest rates are rising. We have no savings now and no hopes of paying the HELOC off before its maturation. There is also no hope of selling our existing residence in that time either (we put down way too much on the home and would lose everything if we sold in current market conditions). The HELOC is also our worst-case emergency fund, so keeping some usable HELOC funds is very important for us. We are making interest only payments on it currently.

A. First, I want you to understand that you were pretty unlucky. That’s different from being in trouble because of some personality flaw. So keep your chin up. I commend you on still having a positive attitude.

The one mistake you made was not to assess the risks that are associated with owning two houses. Unfortunately, you found out about that one the hard way. I caution other readers that no matter how attractive the buying opportunity, it cannot compare with the pain of owning two homes for more than an instant.

If you want to move and find the home of your dreams, put it into escrow but give yourself a 30-day “out” in case your home doesn’t sell. Most sellers won’t take a contingency deal, but you don’t know what the answer will be unless you ask.

As to what to do next, the obvious goal would be to combine both the first and second into one loan for $417,000. If the home appraised for $500,000, you can do that, but not if it appraises for $430,000. I don’t believe you can trust websites like Zillow that are often off more than 10 percent, which makes the answer useless. If I were you, I would spend $400 and get an accurate answer.

As to the HELOC, you might want to strike first. Many HELOC lenders are cutting back loan balances to the existing level and refusing to allow further withdrawals. So if you might need the money, take it out now and sit on it. You run the risk of them pulling the rug out from under you at exactly the time you need it.

Q. I’m about to pay off my mortgage. Any advice? I got a 7-year ARM seven years ago during a re-fi and looked up an amortization schedule that would allow me to pay it off in that amount of time. So by my calculation, I have four more payments. Officially, the mortgage isn’t due for 23 more years. I have an escrow account with the mortgage company. Money in that account should be coming back to me, right? Is there anything I should know as I wrap this up?

A. First, congratulations on your foresight and having the discipline to stick with the plan. I wish there were a way to communicate to others your certain joy at being debt-free so that it would motivate them to make similar plans. There are many websites with calculators so they can figure out what payment is necessary to have the loan paid off at some date in the future

The money in your escrow account will be coming back to you upon payoff of the loan. There is probably a way you can check the current info at the lender’s website so as to make sure of the number ahead of time.

When you send in your final payment they should send you a copy of the loan saying PAID on it or something similar. Normally they will send the original of the Request for Full Reconveyance to the county for recording, showing that they no longer have a lien on your property. You ought to get a copy as sometimes the credit bureaus fail to pick those up. Next time you do your, hopefully annual, free credit check, you will be able to see that loan among those that are paid.

I would call customer service and alert them at the time you do this just to find out their procedures and so you can follow it step-by-step.

If you want Johnson to answer a question, e-mail it to Maurine Pool at mpool@ocregister.com. Include your name or nickname and the city you live in.

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